ANC elective conference: good economics needs good politics

Ideological flexibility will be necessary as the party needs to strategically balance populism with pragmatism

What is the political economy around next month’s ANC elective conference? The build-up to the 2017 ANC elective conference was fraught with uncertainty as to who would emerge as party president. On current evidence, the December 2022 conference is likely to see President Cyril Ramaphosa re-elected. However, there is uncertainty as to who will make up the rest of the top six in the ANC hierarchy and what the balance of power will be among different groupings.

Given the chronic factionalism in the governing party we are still in uncharted waters, so any assessment, economic or otherwise, will need to navigate between what may be hazardous forecasts on the one hand, and rather obvious ones on the other. Yet good economics in SA will ideally need good politics to emerge from the December elective conference. Expectations of what will be delivered on the economic front must nevertheless be firmly tempered by the existing ANC political cross currents.

Uncertainty will inevitably remain elevated until then. As business and the markets weigh up possible political outcomes, it should already be evident that the elective conference will have less to do with economics and more to do with politics, patronage and power. After all, the jockeying candidates all come from the same party and are broadly driven by the same ANC policy documents. Nonetheless, the economic “package” that eventually accompanies the successful ANC team still has the power to influence perceptions about the road that lies ahead for the economy.

Resolutions from previous ANC conferences and recommendations from the policy conference earlier this year will need affirmation — or otherwise — at the December conference. It is all familiar territory. The “nationalisation” of the SA Reserve Bank, the introduction of a basic income grant, the funding of state-owned enterprises, the establishment of a state bank, land redistribution and so on. Whatever is decided in relation to these and other key issues will hang on the coattails of Ramaphosa and eventually his new cabinet.

The nationalisation of the Reserve Bank is one of the more persistent, contentious matters on the ANC agenda. It is difficult to understand the continued preoccupation with this notion when SA has so many other deep economic faultlines to repair. Yet the dogmatism with which this subject is pursued suggests there may be an intention in the longer term to tamper with the Bank’s basic mandate and, perhaps, to gain greater control over the commercial banking sector.

FLEXIBILITY

Whatever the real agenda is regarding the Bank, it could if aggressively pushed eventually trigger a negative reaction from the markets. “Politicians propose, bond markets dispose” is the global mantra, to which former UK prime minister Liz Truss can attest. The last thing SA needs is unnecessary meddling in the work of a respected and credible institution like the Reserve Bank, particularly as the country urgently needs to build investor confidence.

Nonetheless, whatever the outcome of the economic deliberations at the conference, we are facing a quite different set of global and domestic circumstances to 2017. Apart from the residual impact of Covid-19, international and domestic headwinds are gathering speed, which requires realistic thinking and decision-making — from dealing with painful inflation to tackling stubbornly high unemployment, navigating new geopolitical developments and fixing climate change.

Though SA — a small, open economy — is facing external shocks over which it has no real control, this does not mean it cannot “set its sails” to make a real difference to its economic performance. The country still has growth orientated options and structural changes on the table, which need to be activated through tough decisions. The leadership that is elected at the ANC conference needs to strategically balance populism with pragmatism. In other words, ideological flexibility will be necessary.

If, as is expected, Ramaphosa is re-elected, he has some good cards to play, especially if he can expedite the economic reforms to which he has already committed. The extent to which procrastination, policy drift, state capture, corruption and the lack of state capacity have thwarted delivery has already been officially acknowledged. SA must build on its available remedies and growth positives, behind which the conference ought to throw considerable weight.

Effective economic governance now requires that the December meeting outcomes be better aligned to the government’s Economic Reconstruction and Recovery Plan, thus paving the way for more policy certainty and less implementation risk. In this sense, the ANC elective conference remains capable of influencing SA’s economic direction, either positively or negatively. Unbridled political factionalism can still exact a high price from an economy that is already walking a fiscal tightrope.

The recent medium-term budget policy statement was predicated on a series of economic and fiscal assumptions that, though plausible, leave little room for error. While an elective conference may be a platform to let off a certain amount of populist steam, strategic leadership is nonetheless needed to balance aspirational goals and ideological commitments with economic realities. In particular, populist rhetoric must not be allowed to mutate into unfunded spending pressures, which could eventually blow existing fiscal metrics off course.

South Africans have a clear and urgent choice to make: either enthusiastically promote economic growth, expedite transformation and keep government affordable and the tax burden reasonable, or face persistent delivery failures, which will lead to rising costs, compromised services, growing financing demands and unmanageable public debt. In short, the choice is between real economic growth with all its advantages and the yoke of low growth with its creeping socioeconomic costs and welfare dependencies.

We need to turn many more South Africans into victors over adversity and deprivation rather than victims trapped in the welfare vice, particularly as the number of people receiving social grants now well exceeds the number of employed people. Social safety nets are necessary, but over the longer term, we must steadily move more people out of welfare into work in an expanding economy.

The challenge for a re-elected ANC president Ramaphosa and his cabinet next year is how to ensure better government and the smart use of power and collaboration — especially with the private sector — so as to make the right policy choices and achieve much better economic outcomes. These days, elections invariably deliver surprises. Will the December ANC elective conference deliver some good ones?